<p>
  The market assumptions behind the Black–Scholes formula for pricing European options are as follows:
</p>
<ul>
     <li>The volatility of the underlying assets is constant over time</li>
     <li>The underlying asset price follows the lognormal distribution, this means that the log-returns of stock prices are normally distributed</li>
     <li>The underlying asset can be traded continuously</li>
     <li>The underlying stock does not pay dividends during the option's life. But the basic Black-Scholes model was later adjusted for dividends, here we demonstrate the later version with dividend yields.</li>
     <li>There are no transaction costs or taxes</li>
     <li>All securities are perfectly divisible, meaning that it is possible to buy any fraction of a share</li>
     <li>The risk-free rate of interest, r, is constant and the same for all maturities</li>
</ul>
